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“We think that this is an issue that must be considered nearer the relevant time in the light of the available evidence about inequalities and life expectancy and trends in working among older people.”
The evidence on lower life expectancy among various groups in various areas is already available. When is the relevant time to decide on this issue? Although it may be many years before the retirement age rises, the decision to raise it will be taken shortly. If the Minister is serious about persuading people of the necessity and desirability of doing so, he must deal with the problem of the differentials in life expectancy; otherwise, he will get none of the consensus he so desperately seeks. One cannot work in averages across the spectrum.
In our proposals, we put forward ideas relating to private savings and enrolment in schemes, including a Government-backed scheme called the state pension fund, or Scotsaver account, which would provide individuals with a more secure alternative to occupational and private pensions. That is not too far away from the idea of the national pension savings scheme, which we welcome, because such a scheme is necessary. However, we urge the Government to accept that any scheme must be state-backed. We are concerned about what the White Paper says about allowing private providers. There is plenty of evidence that people do not necessarily want choice, but safety, in their pension provision, which means that however the money is invested, it must be a safe investment. That should not be confused by having too many providers and too much choice. Many of the problems in the pensions industry were caused by the breakdown in confidence following the mis-selling and company pension scandals, whereby some people’s pensions were frankly stolen by unscrupulous employers.
We can support some aspects of the proposals, and the citizens pension should still be on the agenda.
7.22 pm
Kali Mountford (Colne Valley) (Lab): I have noticed a distinct difference in the tone of this debate compared with previous pensions debates, in which we constantly fell into the trap of blaming each other for past mistakes. I do not want to rehearse those arguments, partly to save the blushes of the Opposition. That difference in tone leads me to believe that it is possible that consensus could come about. To my mind, that must first be established in this House, so that the arguments can be transparent and agreed in the minds of the public, because it is hardly likely that they can come to a fixed and settled view if the House cannot do so. That must be our starting point.
Stewart Hosie: I am not sure whether the hon. Lady’s argument is the right way round, as I think that the consensus has to come from the outside first. Does she find that when she speaks to pensioner groups and senior citizens in her constituency there is already a clear consensus on ending means-testing and reintroducing the link to earnings as soon as possible?
Kali Mountford: That is true to some extent. I also find some pensioners who, having taken advantage of the many offers available to them, say that they have never been so well off. There are two views. At many pensioners meetings, I am first harangued by those who take that position, and then quietly spoken to at the end of the meeting by those who say, “I didn’t really like some of what was said to you, Kali, and I’d like to put a different view to you.” The two arguments never seem to meet. I make no apology for the fact that when we came into government our first objective was to tackle pensioner poverty; that had to be the right way to go. However, it would not be right to continue with a scheme that would fix means-testing in perpetuity. We need not feel ashamed about helping those who were the very poorest and ensuring that the resources that we had were targeted at them, but we must find a way to move on from that.
I feel as though I am in “Back to the Future”, as I have debated this issue for many years. The first time I spoke about what we should do about what was then called the demographic challenge was in 1986. Now, 20 years on, it is a demographic time bomb. We have been talking about this for such a long time, with so many different views, that a consensus had to be reached at some point. It has taken us a long time to get to where we are today, but it was vital to do so.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) asked us to look forward still further, to 2064. That briefly reminded me of the advert that I saw for a clairvoyants’ event that had been cancelled due to unforeseen circumstances. The problem is that as time goes on, the period that we have to consider when we think about pensions must be a long way into the future but cannot be fixed in stages. The hon. Member for Weston-super-Mare (John Penrose) made an impressive speech in which he said that he was worried about setting staging posts for events because that would undermine sustainability and the settled position that we might arrive at in this Chamber. Some people say that we have to predict the future and stage everything precisely, while others say that we might have to adapt in the light of unforeseen changes. Both arguments are equally valid.
There have been huge demographic changes since 1986. As my right hon. Friend the Member for Birkenhead (Mr. Field) said at the beginning of his speech, our life expectancy has already risen since the beginning of the debate. That will continue to be true. However, we must also take into account the other social changes that are going on. Young people are not looking after themselves as well—they are not taking exercise or eating properly. If a child aged seven, eight or nine is eating burgers all the time, although we are trying hard to get them to eat something else, we do not yet know what will be the impact on their life expectancy. What will their work pattern be like? What will their life be like as a consequence of social changes and changes to work-life balance and what happens in the workplace? Will the economic changes that have made this debate possible be sustained into the future?
My hon. Friend the Member for Bradford, North (Mr. Rooney), who is not here at the moment, spoke about the impact on people who might need retraining having left one job at the age of 50 or 55 in the expectation of finding another. When I studied this in 1986, it was clear even then that the higher the level of
unemployment and the less people earn, the more likely it is that a person will be considered old. At that time of very high unemployment, particularly in Liverpool, a person was identified as being too old to work even at 35, because it was cheaper and easier to employ young people and get rid of them quickly. Employers wanted that flexible labour market. That is not today’s environment. Sustainability in the work force and the economy cannot be accurately predicted for the next 50 or 60 years, although I would like to think that it could be. Let us be honest with ourselves and accept that labour markets, work patterns and new technologies change. That will and must have an impact on future pension expectations, not least in relation to the amount that people can afford to pay in.
That is especially true for young people, among whom we are seeing a distinct change in social behaviour. For our generation—if I can be so bold as to say that, looking around the Chamber and seeing far too many people who are younger than me—buying something today and paying tomorrow was not the norm. I grew up in a household where we paid for what we could afford and did not buy what we had not saved for. Things have changed. Young people today expect to use a credit card, and there are worries about the amount of debt that they take on. Is it right for those same people to be asked to pay into a pension? I think that it is. If they had to choose between the kind of holiday that they can pay for only with a credit card, and the type of holiday that they can afford at the same time as paying into their pension, that would be a desirable social change. It would be right to ask people to contribute to their pension at an early age. I lecture the young people in my family about that ad nauseam. I see their eyes glaze over every time I do it, but it is necessary.
Mr. McGovern: Does my hon. Friend agree that any consultation following the White Paper must focus on young people? Not only do they contribute to the current generation’s greater pensioner intake, but they are being asked to contribute more to their own pensions in future.
Kali Mountford: I am grateful to my hon. Friend, who makes my point even more concisely than I had hoped to do. He is right. Some of young people’s spending is about living for today. Some of it, however, is about accepting that they must buy a home and provide for their families. At the same time, under our pay-as-you-go pension scheme, they must pay for the pensioners of today while hearing some pensioner groups say that they do not want to pay any taxes, that they have done their bit and worked all their lives and that, despite having had tax-free savings, they do not want to pay tax now. When young people hear that, they think, “Hang on a minute. I’m still paying, and earning less than they receive in their pension, yet I’m being asked to pay taxes, save, pay my mortgage and look after my children.” We must ensure a generational balance. Both generations—the oldest and the youngest—must feel that they are being treated fairly. We cannot build consensus without agreement between the generations. Not all pensioner groups feel exactly the same, because they have children and grandchildren and do not want an excessive burden placed on them.
Mr. David Drew (Stroud) (Lab/Co-op): I agree entirely with my hon. Friend on the generational issues. One of the problems in that regard is that in the 1980s and 1990s an awful lot of people retired early. They might have done so because they had no choice and their jobs were taken away. In doing so, however, many of them got good packages. It is difficult for the generation who have come after them to accept that rather than retiring at 60 or 65, as might have been expected, the previous generation might have retired at 50 or 55 on good packages. That is a scandal that has never really been exposed. In relation to the evolution of the debate, does she agree that that has been a problem?
Kali Mountford: It is a problem in some sectors, but as my hon. Friend the Member for Bradford, North (Mr. Rooney) pointed out—I do not know whether my hon. Friend the Member for Stroud (Mr. Drew) heard him—people who have contributed to an adequate scheme have always been able to take early retirement, and can do so in future, accepting that they will get a smaller pension as a result of actuarial differences. They can change career and do a different type of job with a different level of pay but in a less stressed environment. That is not true of all careers or jobs, however, and that also exposes the differences between economic groups. Some people on low incomes could never be in that situation. They know from the outset that they will have to be in employment for their entire working lives to get any kind of decent pension. They are probably the group to whom we ought to pay most attention.
Mr. Drew: I agree entirely with my hon. Friend, but the problem is that those who took early retirement often had their pensions massively enhanced as a way of buying them out of the labour market. The logic was that those people would not cost that much because their life expectancy was much lower, but that has not been the case. That is a huge burden on some professional schemes.
Kali Mountford: That is precisely why we have problems in the pensions sector now. There were warnings in the 1980s about the challenge of longevity, pension holidays and soft economic management. Trade unions and employers alike referred to taking people out of the labour market in that way as the kindest cut, but that was a short-sighted view, as Members on both sides of the House have accepted in conversation with me, in private if not in public. That process was not as kind as it appeared, and we are feeling its impact now.
We must find solutions, and those solutions must have sustainability built in, or they might fall at the first hurdle. That is where I agree with Opposition Members. We must therefore let go of some old ideas about people having a certain level of income, or the same job, throughout their lives. The world no longer operates in that way. When I accepted that I would have to work until 65, I tried to view that as an opportunity. When I thought about an ageing, white-haired old lady doddering around the place, I realised that I might not be doddering around this place but another place—[Hon. Members: “No.”] I always accept compliments.
These days, however, a woman of 65 is generally perceived as much healthier, more agile and having a great deal more to offer. In previous generations, women were not perceived as having much to offer at all. We were perceived as largely dependent. I welcome the huge shift in that regard in these proposals.
It has been a scandal that women have benefited least from any of the systems. Women have to claim most means-tested benefits, and live the longest on the least money. That is a scandal that must be redressed. The most important outcome to me was not whether a citizens pension or universal pension was introduced, but that we recognised women’s contribution, which might be years of caring for children, older people or disabled people. We now have a real task ahead of us to reach a clear definition of a carer. We have not made that clear enough, and we need to work on it. How will we make sure that our proposals really cater for those years of caring? When women take on work, accepting that the contribution period for their state pension will be shorter, we must give them confidence that the valuable contribution that they made to society through years of caring for parents, relatives and children will be properly recognised. Society could not have managed without those women in the past, and we must recognise their contribution properly in the future.
We must also continue the link between an individual’s contribution and the benefit that they receive. If entitlement is simply linked to residence, there will be a disconnection between that and people’s contribution to society, either through work or caring. That matters to me, as it is a valuable element of building consensus and making sure that the system can be sustained into the future.
7.39 pm
Mr. Nigel Dodds (Belfast, North) (DUP): I welcome the opportunity to speak in this important debate. I also welcome many aspects of the Government’s response to the Turner report. However, I want to deal with concerns that have been expressed by a number of Members about the Government’s woefully inadequate, indeed scandalous, response to the parliamentary ombudsman’s report on workers who have effectively been robbed of their pensions through no fault of their own.
There are more positive aspects. I join the hon. Member for Colne Valley (Kali Mountford) in welcoming the White Paper’s proposals for women and carers. A number of Members have drawn attention to the disgraceful circumstances in which many retired women find themselves. Those women, who have given years to caring for disabled relatives and others, have fragmented work records, and on retirement are utterly dependent on the work records of husbands or partners. Many who have no husbands or partners find themselves in dire poverty.
I am glad that the Government intend to alter the contributory principle to take account of paid contributions, and that far less will be necessary from now on. I am also glad that it will be altered to reward social contributions. Pensioners, many of them women, come to my surgeries and ask “What is in it for me?” The sad fact is that there is not a great deal in the report for many of today’s female pensioners. I shall say more about what the Government might do to assist the pensioners of today.
I am also glad that, at long last, the basic state pension will again be linked to earnings. Many people have campaigned for that for a long time, and the Labour party was vociferous when the link was abolished. However, I share the reservations expressed by others about the fact that the link will not be restored until 2012, rather than 2010, the date suggested by Turner. If the current situation continues, by 2012 the value of pensions will still be falling, especially for the poorest pensioners. That is unacceptable.
We need to end dependence on means-testing. As has been said by the hon. Member for Angus (Mr. Weir) and others, there is far too much means-testing. Many older people are deterred from applying for means-tested benefits because of the stigma attached to it, and it is also a disincentive to saving. I recognise the contribution made by pension credit to the alleviation of pensioner poverty. As a Minister in the Department for Social Development, which was responsible for the Social Security Agency in the former Northern Ireland Assembly, I can testify at first hand to the impact of pension credit in Northern Ireland. Nevertheless, we must end that dependence on means-testing. The best way of doing it would be to set the basic state pension at a decent level, lifting pensioners out of poverty and establishing a link with rises in earnings.
As for the qualifying age for the state pension, I entirely understood the arguments of the hon. Member for Aberdeen, South (Miss Begg). She said that despite reservations, she had come round to the view that the proposals were acceptable. Having talked to many of my constituents, I find that many accept that some of the changes must be paid for, and this may be one of the least offensive ways of doing that. However, the Government will have to deal with the issue of inequalities in life expectancy between people in different parts of the country, and between different types of worker. Problems will be stored up if manual workers are expected to work until they are in their late sixties, although they have a shorter life expectancy than others.
The Government must think about today’s pensioners as well. They must tackle the question of why so many pensioners do not claim pension credit and other benefits to which they are entitled. A recent report in Northern Ireland turned a spotlight on the tens of millions of pounds being paid to people wrongly through error, fraud and the like. I am sure that the same applies in other parts of the country. It was right to identify that problem, and everything possible should be done to tackle it. Nevertheless, more attention should be paid to the hundreds of millions of pounds that are not claimed by the poorest members of society, including pensioners, who are entitled to that money. The Government must do more to ensure that entitlement to benefits is taken up, especially by pensioners.
Members have mentioned the winter fuel allowance, which was raised from £75 to £200 in 2000 but has remained static ever since. Given the enormous increases in fuel prices—which have also been mentioned—it is incredible that the winter fuel allowance is the one payment that has not risen in line with inflation. The Government could do something for today’s pensioners very easily by raising that allowance.
A number of Members in all parts of the House rightly mentioned the parliamentary ombudsman’s report and the Government’s response. Along with others, I have constituents who have suffered greatly as a result of shortfalls in their pension funds. Having contributed for many years, they face a future devoid of the standard of living that they expected. Indeed, many have no hope of a decent standard of living. Those people are devastated: they feel that they have been robbed.
Some workers travelled from Northern Ireland today to attend the debate. I am sure that they were heartened by some of the speeches made by Members throughout the House. I pay tribute to the hon. Member for Ayr, Carrick and Cumnock (Sandra Osborne), who spoke eloquently on behalf of her constituents. She voiced many of my concerns, and those of other Members, about what the Government have failed to do. Although the Government have introduced a pension protection fund and a financial assistance scheme, I do not think that they have done enough to compensate workers properly. They have not done enough to return their expectations to them, and enable them to look forward to a retirement involving a degree of dignity and decency and the standard of living to which they are entitled.
The workers in my constituency who were employed in the Richardson’s IFI plant paid into a fund, as they had been advised to do. They did that on the basis of the best advice, believing that their retirement income was secure. They had every reason to believe that as 49 per cent. of the company was owned by ICI and 51 per cent. by, believe it or not, the Irish Government. Two plants were located south of the border and one was in Belfast, in my constituency. The workers in the Irish Republic have rightly had their pension rights sorted out and have been compensated, but the workers in Belfast have been left bereft of their pension entitlement and have to rely on the financial assistance scheme.
We all want to see better relations between Northern Ireland and the Irish Republic, so I ask that the Irish Government treat those workers in the same way as they have treated their workers, as a tangible example of better north-south co-operation. We hope to put those points directly to Bertie Ahern, the Irish Prime Minister, when we meet him on Thursday. Such fair treatment would go a long way to proving that he means what he says about treating people on either side of the border the same. It seems that fair treatment is all right as long as it does not cost anything, but when it is time to divvy up millions of euros, it is a different matter.
Mr. Drew: I agree entirely with the hon. Gentleman, and I have a company in my constituency called Lister Petter that has gone the same way. Does he agree that one of the problems is that all the schemes are lumped together? That is my criticism of the ombudsman. I would ask for all the schemes to be independently investigated, so we know exactly where the money went and who is responsible. The problem is that the schemes are aggregated and the same arguments advanced every time. That is wrong.
Mr. Dodds: There is much merit in that point and I am sure that it has been noted by the Minister. I hope that he will address it when he winds up this evening.
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